Housing affordability concern fuelling support for negative gearing change, new research finds

Investing | 19 March 2018 | Tim Neary

Tim Neary

19 March 2018 — 4:43 am 4 minute read

Widespread concern over affordable housing has led to a surprising level of support from a majority of non-property investors for changes to negative gearing, new research has found.

The research, on attitudes to property investment and saving for retirement, revealed that four out of five of those surveyed were concerned that rising housing prices are locking young people out of the property market, and that, even among property investors, there is some support to modify negative gearing.

The research, released on Friday at the Conference of Major Super Funds in Brisbane, was commissioned by Australian Institute of Superannuation Trustees (AIST) and conducted by Essential Media.

It was conducted from late February to early March 2018 and involved both in-depth family interviews and an online public poll.

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The results revealed that 55 per cent of non-investors in property would support changes to negative gearing. Just over one-third of property investors also supported changes to negative gearing, with support highest (45 per cent) among those with children.

The survey also found that 95 per cent of investors said security in retirement was an important factor in influencing their decision to purchase an investment property.

Minimising the amount of tax they paid was another motivating factor for 74 per cent of investors.

The survey also found the needs of investors’ children play a role in property purchases, albeit less so than retirement needs. Creating an asset that they could pass on to their children was important for 79 per cent of property investors, while providing somewhere for children to live was important to 57 per cent.

Furthermore, it revealed that many ‘negative gearers’ are expecting to carry large debts into retirement. About one-third of those who negative gear a property expect to carry more than $100,000 into retirement, compared with 8 per cent of those without an investment property, and 11 per cent with a non-geared investment property.

AIST CEO Eva Scheerlinck said the survey confirmed that housing affordability was a significant concern to most Australians, including those heading into retirement.

“The long-held assumption that the home is a safety net for retirees is becoming increasingly dubious as more older people are being forced to rent or use their super to reduce their mortgage in retirement,” she said.

Ms Scheerlinck said it was time to re-examine the role of negative gearing and Capital Gains Tax concessions, adding that negative gearing has been shown to fuel house price rises.

“Unlike superannuation where investments are spread across a diverse range of assets, the majority of tax expenditure on negative gearing flows into unproductive, existing housing,” she said.

Head of research at Essential Media Dr Rebecca Huntley said fear of not having enough to retire on was driving property investment.

“The conversations in the qualitative stage with parents who negative gear show just how much they trust that their investment properties will support them in old age,” said Dr Huntley.

“And yet in order to invest they are moving into semi-retirement and retirement with debts.

“It’s a risky strategy for some. As a result the children don’t believe there will be much left down the track for the next generation to inherit.”

Snapshot of key findings

79 per cent of all survey respondents said they were concerned that rising house prices are locking young people out of the market;

95 per cent of property investors said their primary motivation in owning an investment property was to fund a comfortable retirement;

79 per cent of property investors with children say it is important to have an asset to pass down to their children;

One-third of property investors surveyed have three or more properties;

52 per cent of property investors believe that an investment property is a better way to save for retirement than superannuation;

47 per cent of property investors expect to go onto retirement with debt;

55 per cent of non-property investors support changes to negative gearing, even if this meant prices might fall slightly; and

35 per cent of non-property investors believe that investment properties are superior to superannuation.

Housing affordability concern fuelling support for negative gearing change, new research finds